First Industrial Realty Trust Inc (FR) 2012 Q4 法說會逐字稿

Good afternoon. My name is Tracy, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Industrial earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

I will now introduce and turn the call over to Mr. Art Harmon, Senior Director of Investor Relations. You may begin your conference.

Thanks, Tracy. Hello, everyone, and welcome to our call. Before we discuss our fourth-quarter and full-year 2012 results, let me remind everyone that the speakers on today's call will make various remarks regarding future expectations, plans and prospects for First Industrial. These remarks constitute forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

First Industrial assumes no obligation to update or supplement these forward-looking statements. Such forward-looking statements involve important factors that could cause actual results to differ materially from those in forward-looking statements, including those risks discussed in First Industrial's 10-K for the year ending December 31, 2011, filed with the SEC and subsequent 34 Act reports. Reconciliations from GAAP financial measures to non-GAAP financial measures are provided in our supplemental report, which is available at FirstIndustrial.com, under the Investor Relations tab. Since this call may be accessed via replay for a period of time, it's important to note that today's call includes time-sensitive information that may be accurate only as of today's date, February 21, 2013.

Our call will begin with remarks by Bruce Duncan, our President and CEO, and our CFO, Scott Musil, after which we will open it up for your questions. Also on the call today are Jojo Yap, our Chief Investment Officer; Chris Schneider, Senior Vice President of Operations; Bob Walter, Senior Vice President of Capital Markets and Asset Management; and Peter Schultz, Executive Vice President for our East region. Now, let me turn the call over to Bruce.

Thanks, Art, and thank you to everyone for joining us today. 2012 was another successful year for our Company. I would like to extend a heartfelt thank you to all of my teammates at First Industrial for their contributions. We are continuing to execute on our strategy to drive shareholder value through leasing, with our sights set squarely on our 92% occupancy goal for year-end 2013, as well as through our efforts to grow and enhance our portfolio. As you saw in our press release, on the strength of our fourth-quarter performance, as well as our outlook for 2013, we have recommenced our common dividend. I will discuss the dividend in more detail shortly. But, first, let me review our operating results.

In the fourth quarter, we gained 140 basis points of occupancy, with all the gain coming from leasing and no impact from sales, to finish the year at 89.9%. Contributions came from many markets, and across a range of tenants. For the year, we grew occupancy 200 basis points, with approximately 50 basis points due to the impact of sales. These year-over-year occupancy gains were reflected in our same-store growth of 7% in the fourth quarter, excluding termination fees. Including termination fees, same-store was up by more than 12%, as we successfully recovered back rent from a prior tenant.

In the third quarter, recall that we launched three new developments, comprised of 1.5 million square feet, with a total expected investment of $108 million. Included in the $7.7 million leased, 156,000 square foot expansion in Minneapolis that we brought online in the fourth quarter, our total starts for the year were $115 million. We are pleased to report that we successfully leased First Chino Logistics Center, our 300,000 square foot development in Southern California, prior to completion.

We signed a long-term lease with a specialty food retailer and supplier, who will take occupancy by the middle of the second quarter, approximately one year ahead of pro forma, and at terms that were also ahead of pro forma. Remember that last year, we were successful in leasing First Inland Logistics Center, our 692,000 square foot distribution center in the Inland Empire. This new lease further confirms the level of demand in Southern California, and the quality of the buildings we are adding to our portfolio.

Updating you on our other developments, our 489,000 square foot First Bandini Logistics Center in LA County, and our 708,000 square foot First Logistics Center at I-83 in central Pennsylvania are progressing according to plan. With respect to dispositions of non-strategic assets, fourth-quarter sales were $5.2 million, bringing our total for the year to $85.6 million, comprised of 4.2 million square feet and a land parcel. The weighted-average in place cap rates for 2012 sales was 9%, excluding land, and 8.3% if you include the land parcel.

Sales for the year exceeded our written-down book value by 29%. We met our sales target for the year both quantitatively, in terms of volume, and qualitatively, as we were true to our mission in selling properties that do not fit with our long-term portfolio objectives. For 2013, we are again targeting $75 million to $100 million of sales as we continue to execute on our asset management strategy. As in 2012, we expect disposition activity to be weighted towards the second half of the year.

On the capital side, we continued to strengthen our balance sheet during the year. Our year-end debt to EBITDA ratio was 6.8 times, and 7.9 times if you include our preferreds. During the fourth quarter, we redeemed $50 million of our 7.25% Series J preferred stock. This was a good execution for our shareholders, as it lowered our capital costs and efficiently redeployed some of our excess sales proceeds.

Scott will get into the details of our guidance, but I would like to talk about what we see for 2013 from a big picture standpoint. In the leasing market, our team did a great job of capturing demand, particularly in December. We continue to see decent leasing activity thus far in 2013, but as always, we need to convert activity into signed leases. Markets remain competitive, but with the steady absorption the industry is seeing, landlords are in better position than they have been, which is reflected in fewer concessions and better pricing. Rents continue to recover, with several markets including the Inland Empire, Los Angeles, Houston, Miami, and Indianapolis showing solid rent growth. For 2013, we expect renewals to be flat to positive. For new leasing, we will still see rolldowns this year on average, as we continue to work through leases signed at the market peak.

Regarding investments, we are working hard to identify new opportunities that use the strength of our platform and contribute to our portfolio goals. As we have previously noted, we would feel comfortable with around $200 million of speculative development in process at any one time. We are also actively seeking acquisitions, both leased and value-add opportunities, that meet our quality, market, and return criteria.

Returning to the dividend, per our press release, the Board declared a common dividend of $0.085 per share for the first quarter. At this level, we are establishing a base from which we hope to grow the dividend, while retaining capital for cash needs, including principal amortization payments on mortgage debt, as well as new investments. Considering these factors, the Board decided that establishing the initial payout ratio of 50% to 60% was appropriate.

Before I hand it over to Scott, we are excited about prospects for growth in 2013 and beyond. We have built in internal growth opportunities as we look to meet our 92% occupancy goal by year-end. We are executing on our developments, and our team is energized to find some new opportunities for profitable growth. With that, let me turn it over to Scott. Scott?

Thanks, Bruce. First, let me walk you through our results for the quarter.

Funds from operations were $0.18 per share compared to $0.23 per share in 4Q 2011. Comparing 4Q 2012 to 4Q 2011, before one-time items such as losses from the early retirement of debt, the loss from the partial redemption of our Series J preferred stock, and impairment of undepreciated real estate, funds from operations were $0.23 per share versus $0.23 per share in the year-ago quarter. EPS for the quarter was a loss of $0.09 versus a loss of $0.05 in the year-ago quarter. For the year, FFO per share was $0.88 versus $0.89 for 2011. Excluding one-time items such as NAREIT compliance gains, losses from the early retirement of debt, the loss from the partial redemption of preferred stock, the charge from the IRS settlement, impairment of undepreciated real estate and restructuring costs, FFO per share was $1.02 versus $0.88 in 2011.

Moving onto the portfolio. As Bruce discussed, our occupancy for our in-service portfolio was 89.9%, up 140 basis points from 88.5% last quarter, and 200 basis points from 87.9% at year-end 2011. In the fourth quarter, we commenced approximately 5.4 million square feet of leases. Of these, 2.3 million square feet were new, 1.9 million were renewals, and 1.2 million were short-term. Tenant retention by square footage was 77% for the quarter, and our average for the year was 69%. For 2013, we expect retention to be a little higher on average, helped by improving supply-demand fundamentals.

For the quarter, same-store NOI on a cash basis, excluding termination fees was positive 7%. 5.6% of this gain was driven by occupancy growth, the impact of rent bumps, lease rollovers and less free rent. The balance of the increase was primarily due to lower real estate taxes resulting from tax appeals, as well as lower bad debt expense. Same-store NOI growth, including termination fees was a positive 12.4%, reflecting the successful collection of back rent from a tenant that vacated its space several quarters ago. Overall, lease termination fees were $2.9 million for the quarter, which is substantially higher than what is typical for us.

For the quarter, rental rates were down 6.8% cash on cash, and on a GAAP basis they were up 2%. We expect rents on new leasing in 2013 on average to continue to be negative, with some volatility in that number, given the relatively small population size in a given quarter. For renewal leasing, as Bruce said, we expect rents to be flat to slightly positive. Leasing costs were $2.67 per square foot for the quarter, higher than the third quarter, as a result of more new leasing. For 2012, we averaged $2.35 per square foot. Our G&A for the fourth quarter was $8.7 million, above our typical run rate, due to the accelerated vesting of incentive compensation, related to Bruce's new contract. For 2013, G&A will return to more typical levels, which I will walk through later when I discuss guidance.

Moving onto our capital market activities and capital position. In the fourth quarter, we redeemed $2 million depositary shares of our 7.25% Series J Cumulative Redeemable Preferred Stock for $50 million. We repurchased $13.7 million of our 7.6% notes due in 2028, and $1 million of the 7.75% notes due in 2032, at a weighted-average yield to maturity of 6.3%. We also paid off $14 million of mortgage debt with a weighted-average interest rate of 7.6%.

Thus far in the first quarter of 2013, we repurchased another $4 million of our 7.6% notes due 2028 at a weighted-average yield to maturity of 6.2%. As noted in our press release, we have $72 million of secured debt, with a weighted-average interest rate of approximately 7%, that we plan to pay off prior to maturity this year. We did not use our ATM during the quarter, and have about $107 million of capacity remaining.

A few additional balance sheet items. As Bruce noted, our debt to EBITDA as of fourth quarter adjusted for one-time items was 6.8 times and 7.9 times, including preferreds. Our weighted-average maturity of our unsecured notes and secured financings is 5.7 years, with a weighted-average interest rate of 6.3%. These figures exclude our credit facility. Our credit line balance today is $123 million, and our cash position today is approximately $50 million.

Moving on to our 2013 guidance. Our FFO guidance range is $1 to $1.10 per share. Excluding the estimated $0.02 loss per share from the previously-discussed early pay-off of the $72 million of mortgage debt, and the 2028 notes we bought in the first quarter, FFO is expected to be in the range of $1.02 to $1.12 per share. The key assumptions are as follows -- average in-service occupancy, end of quarter of 90.5% to 92%; average quarterly same-store NOI on a cash basis of positive 1% to 3%; G&A of $21.5 million to $22.5 million; full-year JV FFO is expected to be approximately $0.5 million. Note that this is a lower run rate than the prior year, as we sold another asset from our venture during the fourth quarter.

Guidance includes the incremental cost to complete the three developments launched in 2012. Note that we plan to capitalize $0.02 per share of interest related to these developments. Guidance also reflects the impact of the lease-up of First Chino in the second quarter of 2013 that Bruce highlighted. Guidance does not reflect any potential lease-up of our First Bandini Logistics Center or First Logistics Center at I-83 developments that are in process. Recall these are slated to be completed in the third quarter of 2014 and the fourth quarter of 2013, respectively. The pro formas assume one year for lease-up post-completion.

Please note our guidance does not reflect the impact of any future debt issuances; the impact of any future debt repurchases or repayments, other than those discussed above; any additional property sales or investments, other than the development discussed earlier; any future NAREIT compliant gains or impairment charges; nor the potential issuance of equity. With that, let me turn it back over to Bruce.

Thanks, Scott. Before we open it up to questions, let me just say that 2012 was a good year with a strong finish. Our team is focused on building upon our accomplishments. Our lease at our First Chino Logistics Center development is a great step in that direction. We can drive incremental cash flow through leasing by meeting our 92% year-end occupancy goal that we set at Investor Day in November 2011. Because of our progress toward that goal and our outlook, we brought back the common dividend. At our guidance midpoint, we can deliver approximately 5% FFO growth, excluding one-time items. We are methodically selling our non-strategic assets and using our platform to find new growth opportunities through development and acquisitions.

And as I have said to our team, we look for 2013 to be more of the same, with an emphasis on more. By doing so, we can continue to enhance value or our shareholders. We will now be happy to take your questions. As a courtesy to other callers, we ask you limit your questions to one, plus a follow-up, in order to give other participants a chance to get their questions answered. You are, of course, welcome to get back into the queue. Now, operator, may we please open it up for questions?

(Operator Instructions)

Your first question comes from the line of Craig Mailman with KeyBanc Capital. Your line is now open.

Good afternoon, guys. Scott, just want to clarify, so the occupancy assumption and guidance assumes no impact from potential sales?

That is correct.

Okay. I am trying to reconcile the 1% to 3% same-store, with, you are going to have 200 basis points of occupancy lift. I know you said that renewals are going to be positive or flat to positive, but you're going to have a little bit of drag from new leasing. I am trying to get a sense of how conservative you are being with the same-store outlook versus maybe what you are actually underwriting on a blended basis for rent spreads?

Craig, why don't we do this? Why don't we have Chris talk about 2012 and what our experience was, and the breakdown there?

Sure. Some things we had going on in 2012, we had a very low historical number for our bad debt in 2012. 2013, we're assuming return to our historical numbers. That bad debt was going up in the assumptions. Also we had significant income from some restoration fees and also some real estate tax refunds, which, right now, we don't expect to have at the same similar levels in 2013. When you factor in those positive impacts from 2012, the overall number in 2013 is going on about 300 basis points. So then, you get closer to our guidance, our midpoint of 2%.

What is baked in there for a blended rent spread?

Overall, the rents spread is slightly negative, so we're dropping about 3% on the blended rent spread for new and renewal deals.

Great. Thank you.

Again, that's on a cash-on-cash basis.

Your next question comes from the line of John Guinee with Stifel Nicolaus. Your line is now open.

Okay. Nice job. I cannot remember how many questions you gave me, so I will ask one with a few pauses. First, of the $76 million of the debt early repay, how much cash out the door above and beyond the repayment of the debt will you expect to incur? Second, the average dividend in the industrial your peer group of Duke Liberty, DCT, Eastgroup is about 4%, which would equate to around $0.60 to $0.65 per share. Why didn't you try to be within that peer group? The third question is, what do you think roughly your economic occupancy was for the fourth quarter of 2012?

Okay. John, this is Scott Musil. I'll take the first question on the $72 million of repayments that we've got baked into our guidance, we expect to incur about $2 million of a loss from retirement of debt. That is the $0.02 per share that we referenced in our remarks.

John, on the dividend question, again, we wanted to start out using a conservative payout ratio of 50% to 60%. To us, we want to be able to retain some cash to be able to grow the business, in terms of take care of some amortization, as well as some new investments. It gives us room to grow the dividend over time, and as we grow cash flow, we hope to continue to grow the dividend.

Your economic occupancy for 4Q 2012, any idea what that was?

Yes I think John, I think what you're asking is the average occupancy. If you're looking at the average month-end occupancy, it was 88.7%, versus where we finished the quarter at 89.9%.

So, 88% or 89% of tenant in-place paying rent?

Correct. Yes.

Thank you.

Your next question comes from the line of Dave Rodgers with Robert W. Baird. Your line is open.

Bruce, I know the asset sale program has really been opportunistic, and it sounds like it will continue to be that way. How close are you to the end of, what I would call the cleanup phase and ready to enter the capital recycling phase in a more aggressive way? Any thoughts about how much is left in that program?

Yes. As you look at -- is in our minds our non-strategic pool, we probably have about $180 million of assets that we want to dispose of. I would anticipate that will be done over the next couple of years.

Okay. I guess as a follow-up to that, are you seeing any better pricing on what you are going to market with now? Is that part of the market improving at all, or are you not really seeing that?

I would say, we have to report on that as we go through the year, but in general, there's more dollars looking at properties, so we are encouraged by that. Again, it's one-off type of things we will report in each quarter on how we are doing, as far as going after our targets.

Your next question comes from the line of John Stewart with Green Street Advisors. Your line is now open.

Look, I think what you have done on the balance sheet front makes a lot of sense and continues to do so. My question is, I am real curious that there is no equity issuance baked into the guidance. Bruce, I would love to get your thoughts on why it might not make sense to de-lever by issuing some equity?

John, we never put guidance that we are going to issue equity. What you see over the times is that we're judicious in using our equity, we view it as an arrow in our quiver. If you look at what we've been able to do in terms of bringing debt-to-EBITDA down to 6.8 times, and debt plus preferreds to EBITDA to 7.8, we're making good progress on that. We want to continue to de-lever over time. The best way we can do that is leasing up the portfolio. Again, we haven't issued equity in the past, but we have been judicious and mindful of dilution.

Okay. Bruce, curious in terms of really the next act, both specifically for First Industrial, and then too if you could comment on your plans beyond the end of your employment agreement at the end of next year.

I serve at the pleasure of the Board. From my standpoint, we are in a good position here at First Industrial. We are able to be offensive in terms of new developments and are very excited about those. We are having good success with that, and we have to continue to have good success. We want to continue to develop in our key target markets.

We want to continue to grow this Business. We do think there's an opportunity to continue to delever, because we have high-cost debt and have been successful in the last few years of being able to take that out at fairly good, we think attractive pricing. Again, it is more of the same, but I think in terms of where we are going, the world is getting better. We've got a good platform and we are utilizing that platform. I think it is pretty good time.

How much longer you expect to be doing this?

You know what? I would say I signed up for two additional years with an option to do three more years after that. We will see how it goes and how the Board feels about my performance.

I like your chances. Thank you.

Your next question comes from the line of Michael Mueller with JPMorgan. Your line is now open.

Yes. Hi. Two quick ones. First of all, Scott, on the mortgage maturities that you're going to prepay, what is the timing of those in 2013?

They are spread out each quarter, Mike, there is some in the first, second, third, and fourth quarter. There is a little bit more in the fourth quarter than the previous three.

Got it. Okay. I just want to confirm, clarify something. When you were talking about the same-store goal, or the goal of 92% occupancy by year-end, you did say that was more the same-store type metrics, that we should be comparing that to the 89.9% at year-end, so we're thinking 89.9% going to 92% as a target excluding any disposition or acquisition impact?

That's correct.

Okay, thanks.

(Operator Instructions)

Your next question comes from the line of Michael Salinsky with RBC Capital Markets. Your line is now open.

Thank you. This is a follow-up to Dave's question, $180 million of non-core you talked about how much are you actively marketing at this point? As the second question, trying to fit within the one question rule, as you think about your land bank, how much of that should we look for any land sales this year? If you're marking it to market today, how much appreciation do you think you have seen on that?

This is Bob, Mike, on the marketing question, we are constantly looking at various assets and putting them in the market, taking them out of the market. I would also remind you that a lot of our sales are very user focused. Those tend to be not really marketed exercises per se, so I would say it is hard to say at any given time how much is technically in the market or not.

The best thing we can do is when we close, we will let you know exactly how we did with that. The second question was on the land market, I would not anticipate big sales of the land. We like our land position. There could be some one-off sales of not serious dollar amounts, but of the $50 million we have, we like what we have. We think it is good value. We don't really look at it in terms of how much should we mark it up for, because we anticipate on using that in terms of new developments.

Thank you.

Your next question comes from the line of Milton Dresner with Milton Dresner Investments. Your line is now open.

When do you think you are going to start issuing dividends on the UPREIT shares?

Milton, this is Scott Musil. It will be the same timing we're going to do it on the common shares. For the first quarter, the payment date is going to be April 15.

Thank you.

Your next question comes from the line of Stuart Hindley, shareholder, your line is now open.

Thank you. This question will probably be for Scott, if you are able to answer it. Could you provide an estimate of the 2013 tax characteristics on the dividend, assuming it remains at this level for the year and based on your guidance?

Stuart, we don't give specific amount of guidance on our taxable income. I will give you some general parameters. When we look at our taxable income compared to our common dividends and our preferred dividends, there is a fair amount of cushion between the two.

Thank you.

Your next question comes on the line of Dave Rodgers with Robert W. Baird. Your line is now open.

I want to follow-up on the smaller spaces in the portfolio. I think it was asked before, but again to get an update on the trend. How is activity in the smaller spaces, say under 50,000 square feet? Are you beginning see more traction there? Or are we seeing the volume still at the high end of the spectrum? As a follow-up to that, your spreads that you talked about, are you seeing a big divergence in the spread or lease rates for those spaces relative to the larger spaces?

Dave, let me ask Peter Schultz, who runs our East region, to comment on that.

Sure, David. We're seeing pretty good activity in the smaller spaces, both new deals, as well as expansions from existing spaces. We are continuing to be happy with that. Certainly, as there is a pickup in the recovery in the housing market, that may offer additional demand in those spaces.

Okay. Thank you.

(Operator Instructions)

Your next question comes from the line of John Stewart with Green Street Advisors. Your line is now open.

Thank you. Was hoping you could give us a quick update or status report on where we stand on the top ten vacancies you outlined for us at the Investor day.

Sure, John, at the end of the fourth quarter that is about 130 basis points. As you recall, at the Investor Day, it was 325 basis points.

Any specific transactions or progress to report?

You know, I think as Peter said, I would echo his comments, we're seeing good activity across all of our top 10 vacancies and continue to market them very actively.

Okay. And then just on the agreement with the IRS, the language characterizes it as preliminary, just wanted to get a status report there?

Sure, John, this is Scott Musil. Just to refresh everyone's memory, we made a written agreement with the regional office of the IRS on our audit settlement in the third quarter of last year. The last hurdle was for the Joint Committee of Taxation located in Washington DC to review our case. We have been informed by the IRS that our file has been sent to the Joint Committee. What our IRS agent has told us, the one that is reviewing us, said that within the next couple of months that review should be taken care of. Hopefully, we will know some news in the next couple months about the finality of that manner.

Great. Thank you.

Your next question comes from the line of John Guinee with Stifel Nicolaus.

Just a curiosity question. I think, probably, Scott, if you look at page 3, you have construction in process of about $26 million. And then if you look at page 35, which is your NAV, you've got construction in process plus associated land of $72 million. As the difference between $72 million and $26 million all the land?

That is correct. That is the fair share of the difference. If you look at the title on page 35, it is CIP and associated land. That includes the land for those developments. The CIP line item on page 3, which is the balance sheet, is all of the costs other than the land.

Okay got it. Thank you.

Your next question comes from the line of Craig Mailman with KeyBanc Capital. Your line is now open.

Bruce, could you maybe give a little bit of color around the lease in Chino? I know you said it came in above pro forma on rents. Maybe could you give us a sense of the length of the lease and kind of expected yield?

Craig, let me have Jojo take care of that, because he did all of the hard work and got it done and the West Coast team. Do you want to talk about that?

Sure. It's a specialty food retail supply company, primary serious area would be West, in terms of yields and rents, last quarter, we mentioned to you that we were going to project a 7.1% yield. I am happy to report that we would exceed that yield on a GAAP basis, because we have outperformed the rent expectations. Now, I would not be able to give you the actual rate, but I will mention to you that on average these sizes of buildings in Chino, California would rent in the $4.50 net range. That would be roughly, if you're in California, you would think about that on a monthly basis as roughly $0.38 per square foot, net.

Does that answer your question?

It does. What does that translate to into a cash basis? How long as the lease, the initial term?

The lease is long-term. And in terms of cash basis in terms of yield? Is that your question?

Yes.

Yes, cash basis yield would be exceeding the 7.1% pro forma yield on a GAAP basis cash that we mentioned to you last quarter.

Okay. And then just, for Bruce, I know you're comfortable maybe ramping the development pipeline to $200 million, you are at $108 million now. What projects could you see taking off in the near-term? Do you think you need to run out and buy a new pieces of land, or are you good with what you have right now?

First off, we're less than $108 million because the $108 million included Chino, and now that that's leased, you take another $20 million off that. We are about $88 million, if you will. We have about $120 million, $110 million in new development.

In terms of land, we do, again, we are working on entitlements on a couple of sites in Pennsylvania. We are close to getting those finalized. I don't know if we'll go spec on those. One we wouldn't go spec on, it would be build-to-suit. We've got conversations going on with some other pieces that we have. Again, whether it is land or we will buy like we did with Chino and First Bandini and one in central PA we went out and bought the land and started development. We will look at that, as well.

Again, we're going to focus on our target markets and we are excited about the product that we are being able to deliver. The quality, the locations, and being able to lease them out. Again, the onus on us, to continue to execute get these projects built on time, on budget and get them leased up. So, far we are having success and I continue to expect we will have success. We've got to prove it every day.

Great, thanks.

(Operator Instructions)

Your next question comes from the line of [Sam Channing with First Industrial]. Your line is open.

I have two questions. One is on the sales of your property, do you find that you're selling to users that are occupying the buildings, or to the outmarket? Because we find that everybody we've been selling to in our market here has been buying to users, the people that are occupying the buildings and have their own lines of credit for financing.

This is Jojo. We sell properties to users and investors. Just to give you a sense, in 2012, overall, two-thirds sold to users. Going forward, we are about, like Bruce had mentioned, we are all about maximizing value. When we look at our non-strategic properties to sell, what we're trying to do is make sure we get the best value. If we feel that it is a user-type buyer, we will give it the maximized value. That is what we are targeting. If we continue to lease the space thereto, we would target investors, because as we all know investors pay the maximum value for leased product.

There are no further questions at this time. I turn the call back over to Mr. Duncan.

Great. We appreciate your interest. If you have any questions, please follow up with Scott, Art, or myself. We look forward to seeing some of you down at fun in the sun at the Citibank conference in a couple of weeks. Thank you.

Thank you for joining. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.